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SEBI Eases ‘Trading Plans’ Framework for Company Insiders
Context:
Security Exchange Board of India (SEBI) eases the ‘trading plans’ framework for insiders of companies.
More on News:
- SEBI relaxed the ‘trading plans’ framework for insiders of companies who constantly have access to undisclosed price-sensitive information (UPSI).
- To give this effect, SEBI amended insider trading rules, which will come into force on the 90th day from the date of its publication in the Official Gazette.
Key Changes and Provisions:
- The minimum cool-off period between the disclosure and implementation of a trading plan has been reduced from six months to four months.Insiders can set upper and lower price limits within +/-20% of the closing price on the date of submission.
- Trades will not be executed if the security price is outside the set limits.
- Insiders must report non-implementation of trading plans due to lack of liquidity within two trading days after the plan ends.
- The Audit Committee will decide if the non-implementation was justified.
- Insider trading prohibition based on the premise that trading with UPSI is unfair.
- These changes aim to balance the need for insiders to trade for legitimate purposes, while maintaining fair market practices.
- This framework provides more flexibility for insiders while still requiring strict compliance.
Trading plans:
- The PIT Regulations, 2015 introduced the concept of ‘Trading Plans’ (TP).
- It provides a framework for insiders like senior management and Key Managerial Personnel (KMP) with UPSI to engage in securities trading in a compliant manner.
Trading by Insiders:
- SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations, 2015) prohibit trading based on UPSI, which could affect market prices if disclosed.
- The prohibition is intended to prevent unfair trading advantages.
- However, insiders may trade if they do not possess UPSI and adhere to other PIT Regulations.
- They may need to trade for creeping acquisitions, public shareholding norms, or disposing of shares acquired through stock options.